The Written Culture and the Default Culture . . .

Suppose you work in a company that has Superior Customer Service as one of its Core Values, Best-In-Class Customer Service as one of its key Strategic Objectives, and a company metric related to something like “90% or above customer satisfaction rating”. It would be hard to deny that this company is all about the customer and sees superior customer service as a distinct competitive advantage, which in turn drives company performance (revenues and profits).  Suppose they also invest more than their competitors in customer service training for their staff. Another indicator that this company believes that improved customer service leads to improved business performance.

Plus, at every meeting and town hall the leaders of the company talk about the importance of customer service, listening to customer feedback, acting on customer feedback, and developing ever more ways to improve service and satisfaction levels.

Great!  Most of us would say the company is serious about customer service. And indeed they are, until . . .

I have had the opportunity to both observe and consult with companies such as the one above and mostly they “walk the talk”.  And I said mostly, because I have also seen how these very same companies behave, or should I say how the leadership team behaves, when revenue forecasts are declining and/or profit margins are falling.

They decide to cut staff.  Some call it various business names, such as headcount reduction, right-sizing for a shrinking business, or “adjusting to the realities of the business”.

(I am not talking about those big economic events like 911 or the global financial meltdown of 2008-2009.  These hit all industries and all companies with the same reality of a significant drop in consumer confidence and global spending patterns. In those few instances, where the very survival of the company and the industry is at stake, severe cost reduction is a necessity to stay in business. I am referring to the far more frequent event where one company sees a forecast decline coming in their business.)

actions talkSo, they eliminate staff and the payroll and other costs associated with those staff.  Some do it with an across the board 10% (or whatever the number) reduction in all departments.  Others are more thoughtful and try to eliminate low performers at any level. Many reduce travel and entertainment budgets to reduce costs. Some put a hiring freeze for a period of time. Some cancel or significantly reduce trade show activities or R&D expenses. All designed to help get costs back in line with revenues, based on pre-determined margin requirements set out earlier in the yearly planning cycle.

A Different Approach:

do things differentlyBut suppose the leadership team really did believe that customer service was a direct driver of revenue and profit? Suppose the company culture was aligned with the strategy of superior customer service? Would they react differently to a business downturn? Some might still reduce headcount to get profits and costs back in line with revenues. But those who really believe in the direct link between service and business performance might do things differently.

What about a serious exercise in seeking customer input into why growth is slowing? And really listening.  What about increasing the number of well-trained customer service personnel in the field?  What about investing in product or service innovations? What about a value chain analysis in either service or manufacturing to see where the waste (excess time and related costs) really are?  There are all the things good leadership teams think about when trying to improve customer service and satisfaction.  However, during a downturn, most of these are forgotten and all activity turns to reducing immediate costs.

Several recent studies in numerous industries have shown that increases in customer service and satisfaction have a direct positive and measurable impact on revenues and profit margins through greater customer retention and loyalty, additional purchases, positive talk with friends which brings in new customers, more frequent store visits, even being willing to pay a little more for the product than that store down the street that gives lousy service. Good service also reduces internal staff turnover and supports greater employee engagement.

If you really want to see some facts and statistics about the impact of customer service, here is a good overview article on the impact of good and bad customer service.

I have learned to watch what leadership teams do more than what they say or print in their company newsletters or annual reports.

Leadership behaviour reveals the real culture far better than any culture survey!

Organizations are shadows of their leaders; that’s the good news and the bad news!


Written and Posted by: John R. Childress

Senior Executive Advisor on Leadership, Culture and Strategy Execution Issues,
Business Author and Advisor to CEOs
Visiting Professor, IE Business School, Madrid

e: john@johnrchildress.com
Twitter @bizjrchildress

Read John’s blog,  Business Books Website

On Amazon: LEVERAGE: The CEO’s Guide to Corporate Culture

Read  The Economist review of LEVERAGE
Also on Amazon:   FASTBREAK: The CEO’s Guide to Strategy Execution

John also writes thriller novels!

About johnrchildress

John Childress is currently Visiting Professor in Strategy and Culture at IE Business School in Madrid and a pioneer in the field of strategy execution, culture change, executive leadership and organization effectiveness, author of several books and numerous articles on leadership, an effective public speaker and workshop facilitator for Boards and senior executive teams. In 1978 John co-founded The Senn-Delaney Leadership Consulting Group, the first international consulting firm to focus exclusively on culture change, leadership development and senior team alignment. Between 1978 and 2000 he served as its President and CEO and guided the international expansion of the company. His work with senior leadership teams has included companies in crisis (GPU Nuclear – owner of the Three Mile Island Nuclear Plants following the accident), deregulated industries (natural gas pipelines, telecommunications and the breakup of The Bell Telephone Companies), mergers and acquisitions and classic business turnaround scenarios with global organizations from the Fortune 500 and FTSE 250 ranks. He has designed and conducted consulting engagements in the US, UK, Europe, Middle East, Africa, China and Asia. Currently John is an independent advisor to CEO’s, Boards, management teams and organisations on strategy execution, corporate culture, leadership team effectiveness, business performance and executive development. John was born in the Cascade Mountains of Oregon and eventually moved to Carmel Highlands, California during most of his business career. John is a Phi Beta Kappa scholar with a BA degree (Magna cum Laude) from the University of California, a Masters Degree from Harvard University and was a PhD candidate at the University of Hawaii before deciding on a career as a business entrepreneur in the mid-70s. In 1968-69 he attended the American University of Beirut and it was there that his interest in cultures, leadership and group dynamics began to take shape. John Childress resides in London and the south of France with his family and is an avid flyfisherman, with recent trips to Alaska, the Amazon River, Tierra del Fuego, and Kamchatka in the far east of Russia. He is a trustee for Young Virtuosi, a foundation to support talented young musicians. You can reach John at john@johnrchildress.com or john.childress@theprincipiagroup.com
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